During the opening credits, the voice of deejay Surf Sam (Dave Sebastian Williams) of radio station KBLA announces that Halloween night 1965 is hours away, and that Tubby's Drive-In, the Hollywood Knights' hangout, is closing for good that evening. An egg hits the name of director Floyd Mutrux.
Newbomb Turk (Robert Wuhl) pulls a dead body prank on an elderly woman with one of his friends hiding under the tonneau cover of the 1965 El Camino he borrowed from his older brother. Later Sally (Fran Drescher) and her friends are tanning topless by the pool, and Newbomb catches some instant photos with his camera before they discover him and drive him off. Officer Bimbeaux (Gailard Sartain) and Officer Clark (Sandy Helberg) meet with the police chief. He warns the officers not to aggravate the situation about the drive-in on its last evening of business. He then notices that the Knights have tagged the side of the patrol car.
The Beverly Hills Residents Association meets at the home of Jacqueline Friedman (Leigh French). Bimbeaux and Clark stand by in the kitchen, arguing loudly about popular music. The doorbell brings Jacqueline and her secret lover Nevans (Richard Schaal) onto the porch where a flaming bag of dog poop awaits them, and the Knights moon them from their car as they speed off. Then the Knights: Wheatly (Randy Gornel), Shorty (Glenn Withrow) and Simpson (P.R. Paul) meet Newbomb at the drive-in and ask whether it is a good idea to borrow the El Camino. Simpson promises he will bring his custom rail job car later. In the patrol car, Clark asks Bimbeaux if he would look good in a mustache, and sings about Lawrence of Arabia. Bimbeaux argues the movie soundtrack has no lyrics.
The Knights drive to Watts with their four club pledges, order them to strip naked and retrieve the four tires in the trunk. For initiation, they must request a song from the KBLA deejay and return by two in the morning. Surf Sam turns over the broadcast to Doctor J (Humble Harvey Miller).
Back in Hollywood, the Knights hide in a tree to wait for Sally and the girls to arrive at their secret spot to change into other, more sexy clothes for the pep rally. As they remove their bras, Newbomb loses his balance and gives them away; the girls flee as the cops arrive. Bimbeaux reads off the Knights. At Smitty's auto shop, Duke (Tony Danza) and Suzie (Michelle Pfeiffer) discuss her upcoming screen test and her job as a carhop. She needs a flexible schedule to pursue her acting career. He complains that men making wisecracks about her disturb him, and she argues that she is the one who must tolerate it.
The Iron Box Twins, Brenda and Shirley Weintraub (Joyce Heiser, Roberta Wallach), arrive at the drive-in for burgers, and when the song "Volare" plays on the radio the girls pull off to avoid Newbomb, who tends to do a farting version of the song. Jimmy Shine (Gary Graham) discusses his deployment to Vietnam with Duke and Smitty (James Jeter), their mentor. Moosie (Moosie Drier), a youngster with a penchant for skateboards, arrives. The officers yell at him for carrying cigarettes, but he then hops a ride with some of the girls in their convertible. Sally cruises off with a college-aged man to Newbomb's disappointment
While cruising in Hollywood, Newbomb shows the girls the pictures he took of them at the pool. He parks the El Camino by a fire hydrant outside the high school to go to the pep rally and ignores warnings from his friends. At the rally, Jacqueline brings her husband Jack (Garry Goodrow) onstage with local weatherman Thorny Thornwell (Will Thornbury). The band enters the gym, and a banner is unfurled which reads, "Beat the Panthers," with graffiti added in the middle, tagged by the Knights.
Dudley Laywicker (Stuart Pankin) and his mother (Mina Kolb) head to the rally for Dudley to receive his honor student check for $500 to cover his first year of college tuition. He is wearing his band uniform and balks when his mother suggests stopping at a restaurant because he says the staff teases him when he arrives in uniform. She ignores him. Jacqueline is making out in a car with Nevans when Dudley arrives and asks for her opinion of which magic trick he should use for the evening's talent contest. Nevans hides on the floor of the back seat, but Dudley spots Nevans' trousers. As Jacqueline tries to make an excuse, Dudley accidentally hits the car horn and it jams, blaring loudly. Jacqueline shoos him away. Newbomb and the Knights startle Dudley into a pseudo asthmatic fit. Dudley begs for his puffer inhaler, asking them not to hurt him as he might be a bleeder. Newbomb borrows parts of his uniform.
Back at the rally, one of the Beverly Hills cheerleaders innocently forgets her underpants and flashes the crowd during a cheer. The officers spot the El Camino at the fire hydrant and call to have it impounded. Some of the Knights in hiding egg the cops and sing the Lawrence of Arabia tune Clark had sung earlier. Jack Friedman announces that Dudley is coming onstage for his scholarship check, but Newbomb takes the stage in Dudley's uniform and launches into his farting rendition of "Volare," escaping by outrunning security. The other Knights tell Newbomb that Bimbeaux towed the El Camino. They speed out, leaving Dudley to retrieve his discarded clothes. The officers mistakenly think Dudley is the perpetrator until the faculty and school photographer arrive and straighten everything out.
Two of the pledges in Watts are hiding in the bushes outside a couple's home (and realize they are making love) while the other two borrow makeshift outfits from sheets on the clothesline. The corner of a pillowcase stands up on one pledge's head, and the husband spots it and grabs his shotgun, thinking he sees the KKK. The boys flee, finally arriving across from the record store but unable to figure out how to get to the deejay.
Newbomb returns in his own car, labeled as a pie wagon. He hides under it when his brother (Demetre Phillips) arrives looking for the El Camino and tells the Knights if anything happens to the car, he will strangle Newbomb. The others cover for Newbomb and he fakes indifference when the coast is clear. In the women's restroom, the Iron Box Twins discuss a rumor about the Friedmans' daughter until they find that Newbomb has hidden in a stall and tape-recorded them.
Surfer dude Tarzan (Gary Prendergast) arrives with his hot girlfriends Jane (Carol Ann Williams) and Cheetah (Debra Feuer). Newbomb drives them around the neighborhood in their custom Woody, tries to score a feel and gets a milkshake dumped on him. Simpson and Wheatly race another souped-up car, and when they lose, they discuss whether the Knights will stay together once some of the members go to Vietnam or college. Wheatly says Simpson can cruise with him and the Knights will not ever break up.
A catering van pulls up at the high school dance, and the Knights convince them to hand over the punch they are delivering. Newbomb tells the caterers to detour the van through the hibiscus gardens because the area will soon become the Newbomb Turk Memorial Library. The Knights, in a tribute to Tubby's, spike the punch by urinating in it. Moosie warns people going into the dance but, when Bimbeaux and Clark catch him with a cigarette, he tells them to enjoy the punch. At the punchbowl, Jacqueline and Nevans discuss the strange beverage and summon the officers. Bimbeaux tries the punch and asks for seconds. The caterers, anxious to be finished for the night, decide to drive through the bushes as Newbomb said, and the underbrush wrecks the delivery van. The faculty members and Jacqueline are furious that the Knights are involved again.
Jane and Cheetah join in another plot and flash Dudley so they can borrow his clothes again; Dudley asks Newbomb to be careful with the rented magician's cape when he goes to the talent contest. Beside the stage, Shorty switches out the PA system and replays the recording of the bathroom conversation by the Iron Box Twins for the audience, to the embarrassment of the twins and Jack, who is the emcee.
Simpson assures Dudley that he will be back shortly in his rail job and to stay put while he is missing his clothes (and with them, his glasses and puffer). Jack Friedman announces the next talent contestant, Mr. Sasha Dabinski, the One-Armed Violinist. Dabinski is actually Wheatly, with Newbomb accompanying him at the piano; hiding one arm inside the waistband of the pants, Wheatly holds the violin with his chin, rasps a solo with his free hand, then grabs the bow at his crotch.
Jacqueline and Nevans leave the usual confines of his car to make out on a trampoline, only to meet up with Dudley, who is stumbling around in the dark without his glasses. Sally brushes off her college boyfriend in favor of Newbomb, and they head to the pie wagon. As they get ready to make love, Newbomb is unable to hold out long enough. She whines at him for being immature, but he is relieved.
At Smitty's they reveal a special custom car to Jimmy Shine as a going away present. Their guest, custom car man Tony Nancy, and the men show Jimmy a tape deck inside playing the Mamas and the Papas as Jimmy thinks about his deployment the next day.
The time is one in the morning, and in Watts thieves strip tires from a car just as the pledges pass by with their tires from the Knights' car, and the homeowners give chase. At the shop, Smitty is discussing his time in the war, when he and a man known as Grease modified a jeep engine and buzzed General MacArthur during a parade. Grease later died in a drunken crash. As they reflect on the tragedies of war, Jimmy Shine says he wants the new car to go to the club if anything happens to him in Vietnam, but the other men tell him not to worry. The pledges decide to take their chances with a group of street corner singers, hoping they can give the song dedication to the deejay. The pledges are running out of time to return to Beverly Hills. The singers agree.
Bimbeaux and Clark receive an upbraiding by the captain on their radio. Still, Bimbeaux cannot resist teasing Newbomb about the impounded El Camino, and Newbomb decides to get even when the officer uses the restroom. Shorty fixes the restroom doorknob with his handy screwdriver, and Tarzan gets a potato for the tailpipe of the patrol car. While Clark waits in the car, he draws a fake mustache on his face using a marker. Bimbeaux goes into the bathroom. The toilet, stopped up with toilet paper, floods the floor when he flushes. Outside Newbomb dumps cans of garbage in front of the door. When Bimbeaux is trapped in the bathroom and calls for help, Clark shoots out the doorknob with his service pistol, and Bimbeaux slides on the trash when he comes out, ruining his uniform.
Simpson arrives with his rail job. Dudley jumps in front of the patrol car when the officers attempt to give chase, as if seized by epilepsy, then jumps up and escapes the cops by hopping a ride in the rail job. When the officers try again to pursue, they hit another car. Returning to the drive-in at closing time, Jimmy Shine gives Dudley his Knights jacket to watch until he returns. When the Knights suggest picking up the pledges they left in Watts, at first Dudley panics, then he takes a final drag on his puffer and discards it, ready to go.
Duke and Suzie talk at last. She says she cares more about him than her screen test. Duke confesses that he was worried if she became an actor he would not be good enough for her, but she says she loves him and they reconcile with a kiss.
The street corner singers meet Doctor J on KBLA just in time, and he announces the request on the radio as the pledges arrive at the parking lot, the requested song plays to end the Halloween broadcast, and they earn their Knights jackets. Jimmy Shine leaves to have a farewell dinner with his family before he departs for Vietnam and he hugs Smitty, who has been like a father to him.
Dudley calls his mother to tell her he will be late because he has a assignation with a girl and is going to get laid, and she faints. Jacqueline and Nevans are still experiencing aftereffects from the spiked punch, but are in Nevans' car parked outside her home. She assures him that her husband is too drunk to wake up. When the cops give chase to the Knights, the patrol car crashes into Nevans' car and Jack appears, catching the two with their clothes in disarray as the Knights moon them all. Tubby's shuts off their lights for the last time.